Wealth in the world

According to this article, if you have more than $2,200, you're rich. Actually, that puts you in the upper half of everyone in the world, which really just makes you just above average, not rich. But to decide if you're rich, you don't usually compare yourself to an East Timor rice farmer, you compare yourself to the Joneses. When I was growing up, we lived next door to a guy named Jones who had retired in his early fifties after making a killing on Wall Street. It used to piss my Dad off because Mr. Jones would spend all his time working on his yard, and we never could win the Yard of the Month award. According to the IRS income statistics here (MS Excel file), if you make more than about $30,000, you're in the top half of income in the US. The median US household income is around $44,000 according to this article in Wikipedia.

The IRS has various definitions of rich, like HCE's (highly-compensated individuals) where there are limitations to contributions you can make to tax-deferred retirement plans, among other things. For 2008, if you make $105,00/year, you are an HCE (it was $90,000 in 2003). Up to $102,000 is subject to social security tax (it was $87.000 in 2003). A 2003 Gallup poll found that the public's median definition of "rich" was an income of $120,000. So we're narrowing it down to somewhere in the range of six figure income.

But there's a difference between wealth and income, and being rich describes your wealth, not your income. There are people who have high incomes but are not rich, because they have no savings. You might hear someone described as "house-poor", where they buy more house than they can afford, and even though they have a very nice house they have debt and trouble with other basic financial obligations. In fact, there are certainly high income people in the US whose net worth is less than an East Timor rice farmer. But making more money doesn't make you feel rich. My observation that no matter how much money someone offers to pay you for your job, within a short time you feel that you deserve it, and are entitled to more. Especially if you know someone who makes more than you, which is true of everyone. That's not to say that more money isn't good. But more money isn't always enough to make you happy. Or even rich.

The idea of being rich is certainly subjective. The 2003 Gallup poll found that although only 2% of Americans describe themselves as rich. Growing up, my definition of being rich was having more than one house, and not having to work. My friend Jeff Cahill's definition of being rich was living in a house and not in an apartment. An East Timor rice farmer is rich if he has a yak or a water buffalo. I don't think of myself as rich, because I look around and see folks who have multi-million dollar houses and drive $100,000+ cars every day. There's a definition of rich (which they refer to as "prodigious accumulators of wealth" or PAW's) in the book The Millionaire Next Door where you divide your age by ten, then multiply that by your annual income. That should be your net worth. So if you are me, you should have a net worth of 4.3 times your annual income. If your new worth is twice that is expected for your age and income, you are a PAW. So according to the book, to determine if you are rich you also have to consider your age and income, which makes sense.

Most of my wealth is in my 401k and in my house. The value of my house is surprisingly easy to find here and here. I'm just an AAW (average accumulator of wealth), with my net worth right at the target of 4.3 times annual income, but I hope to eventually be a PAW (when my Lotto numbers finally hit).

fyi Forbe's lists the 15 richest fictional characters here.